by Tyler Cowen
on March 21, 2015 at 12:34 pm
1. Vancouver average is over.
2. The bestselling book in each year.
3. Russ Roberts interviews Paul Romer.
4. “Being salamanders, they’re pretty slow.”
5. Yet another reason to eat beans (the Hispanic Paradox).
Re 1, this is not new. In 1996 I was offered a faculty position at UBC. Even at that time real estate was very expensive and people were blaming it on foreign buyers (at the time, Hong Kong Chinese, as this was around the time of the expiration of the lease). Everyone bemoaned the deleterious effect this had on the City and the ability of real people to live there.
So, auctioning off some of the real estate in your city, increasing the density and smog, and having tens of thousands of absentee owners (ranking lower tier Politiburo family members looking for a bolt hole?) ISN’T a good thing?
The author claims that the 3.4% foreign ownership, as measured by the CHMC, is flawed because it includes Chinese immigrants. He then tries to recover his PC bonafides by mentioning the “large minority” who never move to Canada, but his argument treats ALL immigrant investors as if they are not real Canadians. That sounds unambiguously bigoted, but some of his best friends are Chinese!
I sold our Vancouver property in 2005, when I thought the crash was imminent. Who knew Vancouver would be immune.
– Home ownership is a bad financial decision for most people, yet far too many people have an irrational desire to own a home here in Vancouver (and maybe in many North American cities, too). Renting has been proven to be financially better than home ownership if you invest your savings wisely in a diversified portfolio over the long term. Home prices are extremely volatile, and most people put most of their wealth into their mortgage – a terrible investment strategy. The high transaction costs (fees, taxes, time/effort) for buying/selling a home are also far higher than investing in financial instruments.
– The problem is actually quite fundamental – in Vancouver, the supply of housing is low, while the demand is high. In order to add more residential properties, Vancouver has to densify upward by building more apartment complexes, but it is already dense now, and surburban owners of detached homes in the City of Vancouver don’t want more density – and they actively voice their displeasure whenever a new zoning proposal for densification arises.
“Home prices are extremely volatile”? The stats show that they have done practically nothing but go up, up and up in Vancouver, Axel.
Yes, you’re right – Vancouver has been an outlier in that respect, but my comment about volatility was about housing in general for most cities. The volatility of home prices is quite high compared to a well diversified portfolio of financial instruments. For most people, if they own a home, then most of their wealth is in the home, and much of their pay cheque goes toward the mortgage payments. That’s very worrisome when most of your wealth is subject to the volatility of one asset, compared to the moderation that comes from a diversified portfolio. If the economy suddenly tanks or some other unexpected reason requires you to move to another city, that makes the move even harder; all of the real estate fees, taxes and transaction costs are much higher than simply terminating a rental lease, and the selling price may be lower than expected – wiping out a lot of your wealth.
Not to mention that the price-to-rent ratio in Vancouver is way outside North American norms ( http://www.theprovince.com/cms/binary/6612429.jpg ). North American norms are somewhere around 15x yearly rental price = current cash price, but most of Vancouver is kicking around north of 40, in many places 50. So, yeah, purchase prices are absurd for a city of that size, but there are still a lot of comparatively affordable rentals. I lived there on a graduate student’s budget, and while it was expensive, it was not as comically so as some people are portraying it. (In a 2-bedroom groundfloor apartment in a 2-storey house, 15 minutes’ bus from downtown, my room was 600 CAD, all utilities included. This was a typical rent for the area.)
And there would be more affordable rentals if, as you say, they would build more housing. Everybody’s seen the pictures of high-rise downtown Vancouver, but that’s still a peninsula barely over one square mile, and only around 4% of even the municipality’s land area. Most of the rest of which is composed of single-family homes on 4000 square foot lots (with a few nodes of towers dotted around the region.) So it’s really more like San Francisco than anything else – a couple square miles of mid-to-high-density urban fabric surrounded by vast tracts of mostly lowrise, which existing residents insist on declaring to be “totally maxed out! No more room!”
The Price/Rent ratio is what you need to look at. Who cares if houses cost a million to buy if you can still rent a place for under 1000 a month? And if indeed the economy is shrinking because of the real estate buy-up, the bubble will soon pop and prices will be within the range of many more buyers, and the economy will grow again as people return to live there.
Too much speculation in that blog post, too few facts.
I agree, Jack – I wish that Saeid Fard included more links and references to the many claims that he made.
In his defense, he said it’s not about the Chinese; it’s about the wealthy. If you extend that argument, it’s not really about the facts; it’s about what’s right.
…”but most of Vancouver is kicking around north of 40, in many places 50. ”
Is that a sign of a property bubble? Bubble are always hard to define, but this would seem to be a case of the prices reaching such height that there out of touch with any underlying medium term ROI value.
Home ownership is a bad financial decision for most people,
If you have a family and want to be able to live in a particular community for an extended period of time, then owning is a necessity.
Particularly if you want amenities like a backyard or the ability to customize the layout of your house for your family’s needs.
Those aren’t financial considerations.
Engineer – even if you take non-financial factors into account, the cost-benefit analysis for home ownership is often unfavourable for many families. Yes, there is the customization, the bigger space, and the yard, but there is also the constant responsibility of maintaining and repairing a home; these activities rob much of the leisure time for many home owners, especially if they also need to raise a family. There is also the peace of mind that comes with not having any debt if you just rent – the psychological costs of worrying about constant mortgage payments are significant for many families. I sense that many home owners and prospective home owners overestimate the pros and underestimate the cons of these non-financial considerations.
Furthermore, renters can successfully live in a community for many years, too – home ownership is not a requirement for long-term integration into a community.
I have already mentioned the financial disadvantages of owning a home – which are enormous and probably the primary reason for renting rather than buying. The above non-financial factors are secondary reasons, but also very strong reasons, for renting over buying a house.
It costs more to rent around here than what you would pay for a mortgage. I guess there is the down payment you have to put on the house and the maintenance costs, but surely that would be made up by what you get when selling the house?
Urstoff: Could you please share a reference to compare monthly rents and mortgage payments in Vancouver? (I’m referring to the City – for simplicity, let’s not consider Burnaby, Coquitlam, and other surrounding municipalities for now.)
If you rent, then the money that you save from the down payment and other costs/fees can be invested in a diversified portfolio of financial instruments. Over the long-term, that wealth creation wins over any home appreciation.
Oh I’m not in Vancouver. If rents are vastly cheaper than mortgage payments, then obviously it makes sense to rent.
Home ownership is a bad financial decision for most people
The key phrase is “most people.” Most people won’t invest their savings “wisely in a diversified portfolio over the long term.” In fact, most people won’t have hardly any savings left over. For that reason, I’d advise most people to buy a home if they can realistically afford the mortgage payments.
I also believe there are significant psychological benefits to home ownership that would remain even if you could convince everyone that owning a home isn’t financially sensible. Marriage, children, home ownership. It’s a pretty good formula for happiness (for most people).
Judah – By “most people”, I mean those whose wealth is not big enough to purchase a home entirely with their own money and have plenty of savings left over.
I recognize that most people don’t save and invest their money wisely – those are also bad financial decisions. That does not make home ownership a good financial decision.
As I mentioned above, many people marry, raise children and integrate into their communities by renting homes; these psychological benefits do not require home ownership. (I do recognize that ownership itself is a psychological benefit, in addition to the bigger space in the house and in the yard that home ownership usually affords.)
5 – “While differences in genetic predisposition might underlie this observation, differences in diet remain a possible explanation.”
And, you know, since when have ‘differences in genetic predispositions’ ever provided a good explanation for ethnic differences in epidemiological rates?
Jesus Christ John Grisham must be loaded.
#1) We have all read arguments that we need to stop Mexican immigration to the US because they are too poor. Now, we read that Chinese immigration to Vancouver must be stopped because they are too rich! Might as well get it out of the way now — what will be the argument against middle class immigration?
Also, some immigrants “take away jobs” by working. Worse yet though (apparently, according to the author), other immigrants create “serfs” by hiring them! Those immigrants — if they’re not lowering property values by moving in, then they’re raising property values by buying homes and not moving in! Why can’t immigrants just not take jobs from natives but support themselves financially, create jobs but not expect natives to work for them, and assimilate better without actually moving into neighborhoods where natives live?
Why can’t immigrants just not take jobs from natives but support themselves financially, create jobs but not expect natives to work for them, and assimilate better without actually moving into neighborhoods where natives live?
Because they can’t, which is why they shouldn’t be here.
Immigrants lowering property values by moving in benefits no one. Sure, homes are cheaper now, but the neighborhood is full of immigrants and who wants that?
Immigrants raising property values by buying up property and not moving only benefits those who already own property. The working class gets screwed over.
Why? What happened to the money received?
Middle class immigrants would drive down the wages for middle class jobs and drive up the prices for property in middle class neighborhoods. That’s why silicon valley elites want to import more tech workers. The displacement of White people by non-Whites is bad whether or not the immigrants are rich, poor, or middle class.
The displacement of White people by non-Whites is bad whether or not the immigrants are rich, poor, or middle class.”
Look at the bright side, soon a majority of Americans won’t be white so non-White immigrants will just be “displacing” other non-Whites.
I don’t approve many of our immigration policies and am completely opposed to amnesty, but how anyone could object to living next to a “non-White” computer programmer or other middle/upper-middle class person is beyond me. My focus is on crime, schools, and the broader economy.
White nationalists make it that much harder to argue for sensible immigration reform in America. You’re actually helping the other side.
Judah Benjamin Hur March 21, 2015 at 4:05 pm
I don’t approve many of our immigration policies and am completely opposed to amnesty, but how anyone could object to living next to a “non-White” computer programmer or other middle/upper-middle class person is beyond me. My focus is on crime, schools, and the broader economy.
If people were fungible it would not matter. But they are not. That non-White computer programmer is probably a nice guy. His cousins almost certainly won’t be drug dealers. But he is unlikely to behave in the same way that White Americans do . Even Jewish Americans do not vote the same way that other White Americans do.
America’s success is built on WASPs. Where they dominate, things work really well. Where they don’t, well, things work out less well. America will remain a nice place as long as WASPs continue to dominate. Immigrants, no matter their race, will not become WASPs any time soon. They will vote for policies that make sense to them, shaped by their own cultures. And the result will not be good. If your focus is crime, schools and the general economy, you should not assume that a middle class Asian voter is going to vote for the policies that will bring positive results in those areas. After all, if Indian voters knew what they were doing, India would not be such a basket case and they would not be immigrating to the US. For that matter, if non-WASP Americans knew what they were doing the schools in New York would be a hell of a lot more functional. Remind me again how the economy of Hawaii is doing?
That may be White Nationalism. I hope not. But it is also, you know, kind of true.
Hawaii? I don’t follow it too closely but they were above average in gdp per capita as recently as 2012. http://en.wikipedia.org/wiki/List_of_U.S._states_by_GDP_per_capita
Given that Ireland has surpassed the United Kingdom on the Human Development Index rankings, I’m not sure that the “P” part of your equation is relevant. Not quite sure how one determines the “AS” part either.
As for non-whites, let’s not forget that China was highly advanced for most of recorded history. It’s only in relatively recent times that they fell well behind. Of the top 20 countries in HDI, four are East Asian.
I realize that you would like America to be a mostly White country, but that’s no longer possible. The question is do we become a Brazil or can we maintain our first world status. I happen to think allowing highly skilled immigrants can (somewhat) help maintain our standard of living. We both agree that the low-skilled ones that the Democrats and plutocrats (who dominate the Republican Party) seek are terrible for middle class America.
As for voting patterns, I think it’s foolish to make long term predictions, but I would advise against making any self-fulfilling prophecies.
Judah Benjamin Hur March 22, 2015 at 1:27 am
The point about Hawaii is that they have nothing but Federal spending and tourism. They have not been able to develop a real economy outside of that. They have excellent human capital, they have a good location, they have access to the US market. They cannot succeed except as an appendage of the Mainland.
For Ireland to grow they had to repudiate their Catholic past and embrace the values of their former British masters. Exactly as they were told during the Famine as it happens. Ireland is no longer a Catholic country in any meaningful sense. Even so, they managed their banks into disaster.
China is an interesting example. Japan is more interesting. East Asia has been the only places able to catch up with the West. Why they should have stagnated, why Japan is stagnating now, are interesting questions. Without answers.
Let us agree it is no longer possible for America to remain a majority White country. It will become Brazil if America is lucky. It does not matter if you allow in the highly skilled or not. America’s success has been based on the votes of poor Whites and over the objections of highly educated rich Whites. Think of the voters in Kansas versus Noam Chomsky. Rich, highly skilled immigrants will vote for their values. Not for the values that have worked.
It is not only racism that means people object to Asian computer programmers. There is actually a highly rational objection. This goes directly to the heart of your objection to what Clover said. There is a problem. Highly educated immigrants simply delay the inevitable. If that. It is not White nationalism, it is a simple recognition of the facts.
Jews have been in America in large numbers for over a century. They are loved by the Evangelical voters of the Republican base. Doesn’t help. By and large Jews won’t vote Republican. Their values are too strong and have not shifted much in all that time. Assimilation is a myth.
This is awesome.
No one can succeed in this world unless they’re WASPs.
How about Hawaii, Ireland, East Asia?
Hawaii don’t have a “real” economy. Ireland are No True Catholics. East Asia, well, hey look here!
I see a lack of historical perspective, a lack of geopolitical perspective. If ancient Romans had blogs, they’d have been posting comments about how no one could succeed unless they were Romans.
How about France, Germany, Northern Europe, Chile…?
Claude Emer March 22, 2015 at 4:48 am
Happy to please Claude. It is, of course, easier to mock than make sense. For instance I did not say no one can succeed unless they are WASPs. Starting out with a lie is unlikely to end well.
What historical or geopolitical perspective do you think I lack? Other people have been capable of great things. But the industrial revolution was exceptional and it has been very hard for anyone else to adopt. That is what is hard to explain.
The Romans were highly aware of how dependent they were on the Greeks, the Egyptians and so on. The differences between their achievements and those of the Hellenistic world were trivial.
Chile? You’re kidding right?
If you’re going to look at states, why look at Hawaii? Why not look at the whitest state in America, West Virginia? It regularly comes up in subjective and objective measures of well-being as the worst state in America:
“The study, called The Gallup-Healthways Well-Being Index, interviewed nearly 200,000 people from all 50 states to “measure physical and emotional health.” Factors included employment, education, health and local environment.
And the most miserable state in the United States is West Virginia! For the fifth year in a row!
“Just 44.87 of residents described themselves as thriving, the lowest in the nation,” the survey explains, noting that West Virginians are also “the least physically healthy…in the nation,” with some of the highest rates of blood pressure and obesity.
Silver lining? West Virginia is tied for the second lowest life-expectancy rate.”
What about the displacement of the American Indians? Shouldn’t all the non-American Indians return to their native lands?
Roman policymakers despised the decadent cultures of the conquered hellenistic realms, and had a process of coopting local elites making them Roman along many generations. But I guess it’s safer to suppose So much for subtlety is just one of the trolls that abund in these premises.
#2. That Winston Churchill was quite the writer.
It’s just this kind of link that makes me love Tyler Cowen’s blog. I had no idea there was an American Winston Churchill.
Confusion with the American novelist of the same name
Churchill and his contemporary, the American novelist of the same name, are still occasionally confused as writers. The novels of the “American” Churchill are often incorrectly attributed to the “British” Churchill, or at least listed with the latter’s works, especially by booksellers. The British Churchill wrote only one novel, Savrola, being better known for his popular histories.
Churchill, upon becoming aware of the American Churchill’s books, then much better known than his own, wrote to him suggesting that he would sign his own works “Winston S. Churchill”, using his middle name, “Spencer”, to differentiate them. The following witty and good humoured correspondence passed between the two writers:
Mr. Winston Churchill presents his compliments to Mr. Winston Churchill, and begs to draw his attention to a matter which concerns them both. He has learnt from the Press notices that Mr. Winston Churchill proposes to bring out another novel, entitled Richard Carvel, which is certain to have a considerable sale both in England and America. Mr. Winston Churchill is also the author of a novel now being published in serial form in Macmillan’s Magazine, and for which he anticipates some sale both in England and America. He also proposes to publish on the 1st of October another military chronicle on the Soudan War. He has no doubt that Mr. Winston Churchill will recognise from this letter—if indeed by no other means—that there is grave danger of his works being mistaken for those of Mr. Winston Churchill. He feels sure that Mr. Winston Churchill desires this as little as he does himself. In future to avoid mistakes as far as possible, Mr. Winston Churchill has decided to sign all published articles, stories, or other works, ‘Winston Spencer Churchill,’ and not ‘Winston Churchill’ as formerly. He trusts that this arrangement will commend itself to Mr. Winston Churchill, and he ventures to suggest, with a view to preventing further confusion which may arise out of this extraordinary coincidence, that both Mr. Winston Churchill and Mr. Winston Churchill should insert a short note in their respective publications explaining to the public which are the works of Mr. Winston Churchill and which those of Mr. Winston Churchill. The text of this note might form a subject for future discussion if Mr. Winston Churchill agrees with Mr. Winston Churchill’s proposition. He takes this occasion of complimenting Mr. Winston Churchill upon the style and success of his works, which are always brought to his notice whether in magazine or book form, and he trusts that Mr. Winston Churchill has derived equal pleasure from any work of his that may have attracted his attention.
This suggestion was accepted in this section of the response letter:
Mr. Winston Churchill is extremely grateful to Mr. Winston Churchill for bringing forward a subject which has given Mr. Winston Churchill much anxiety. Mr. Winston Churchill appreciates the courtesy of Mr. Winston Churchill in adopting the name of ‘Winston Spencer Churchill’ in his books, articles, etc. Mr. Winston Churchill makes haste to add that, had he possessed any other names, he would certainly have adopted one of them.
Here’s a link to the American Winston Churchill
Thanks! I didn’t know about the American Churchill.
The ‘real’ Winston Churchill’s mom was American.
He was, if you mean Sir Winston Leonard Spencer-Churchill. The other Winston Churchill was supposed to be OK: http://en.wikipedia.org/wiki/Winston_Churchill_(novelist)
I rented an apartment in downtown Vancouver for a while. 600 sq. ft. Twenty years old. Units in that building sell for C$300,000 – without a parking spot.
British Columbia significantly restricts development (even though it is bigger than France and Germany combined) and that drives up prices in several centers in the Province.
The way that trade unions work for their members (and the way they disadvantage outsiders) is by restricting access to jobs, so driving up the price of labour. It’s therefore hard to see how anyone can be both pro-trade union and pro-immigration while preserving any intellectual consistency.
It’s intellectually consistent if you are concerned primarily with the power of your coalition.
LOL for _Who Moved My Cheese_. I’m not sure if the “business parable” genre is still wildly popular in corporate America, but I ran the training program in the early and mid-aughts for the local branch of a Fortune 500 company, and our internal (centrally-mandated) calendar included a steady stream of these books. I remember one about whales that stood out as particularly dumb, but I can’t remember a single entry from the genre that did not read as, at a minimum, really inane.
With apologies to OWH, I suspect that if you could gather up the whole materia businessica into one shipload and dump the lot into the ocean, it would be better for humanity and all the worse for the fishes.
Yup. Even the best business books are just HBR articles padded out to book length. The worst should not even be mentioned.
#2. Wasn’t there a problem that the New York Times and other keepers of bestseller lists did not in fact count books that weren’t in the mainstream, or were sold in paperback only? Some of the mysteries and popular books that are now considered classics, might well have outsold some of the listed books but wouldn’t have been counted unless sold as hardbacks by the leading New York publishers. It’s not till the NYT started counting discount sellers (such as Crown Books) or adding up all sales (even from outlets such as Walmart) that the bestseller list began to reflect what people truly read.
Yeah, that list has a number of dubious qualities. Yet another example: it claims that the #8 best-selling non-fiction book in 1924 was George Bernard Shaw’s _Saint Joan_.
#2…I have to admit that I found both lists much more interesting than I thought I would. I’m going to read up on Alan Seeger and Edward Bok, and, among the pleasant surprises, I found that four of my favorite books, The Education of Henry Adams, Merton’s The Seven Storey Mountain, Lampedusa’s The Leopard, and Douglas Southall Freeman’s R.E. Lee, were bestsellers. I never would have guessed.
I didn’t know Hitler and J.E.Hoover had bestsellers. There are a number of unnerving tomes on the list, in fact. For some reason, I cannot believe Americans read Andre Maurois on Disraeli. That’s just too weird.
I interpret the lists in #2 to be an indication that there is a large disconnect between the general population, and critics and intellectuals who determine what is historically significant or acclaimed. I believe the intellectuals are at fault.
Fortunately, we all have the ability to decide which books we consider great. “Acclaimed” or not, these works are accessible with the click of a button.
Many early 20th century best sellers, even though mostly forgotten, are available on Kindle for free. It might be nice to read a couple.
Don’t know if this has been posted before or not. The Crack Shack or Mansion Game. There’s a version II as well.
West Vancouver is the richest post code in Canada. There was a poverty survey that came out showing the area nonetheless had one of the highest poverty rates in BC, which didn’t gibe because there is literally no depressed area.
The local MLA initiated a study and it found the poor households were mostly mansions with families in which the husband still worked abroad. They weren’t declaring income even though they were supposed to.
Free health and education, a great lifestyle, and no taxes. The govt has been going after them since.
No one expects the Modern Languages Association!
“a great lifestyle”
The wife and kids are safe from pollution, crime, police crackdowns on corruption and political purges. And you have a place to run to if you get a day or two warning of trouble coming. All basically for free.
Helluva deal. Not so good for the locals.
I only had to get to 1902 to scoff – The Hound of the Baskervilles is only in the best seller category? How many knock offs of The Immoralist have we ever seen? I’m glad they admit that Owen Wister’s The Virginian was both a best seller and historically significant. Hint, hint – not every Henry James novel is worth re-reading. I stopped in a dudgeon in 1907.
2. I was surprised at how many women were on the left list early in the century and how few were on the right list. You could interrupt this as either women write popular but ephemeral works, or academics/critics that determine what is significant are sexist. Maybe both.
Women write in genres that are not respected by modern literary elites, comsidering how many of those elites are currently women makes the reasons for this very interesting.
Another way to put it is that when men controlled the literary establishment romance and sagas about powerful families (aka soap opera) were considered prestige genres, today they are near the bottom of the totem pole. However they are still associated with female readerships.
My explanation is that elite women need to distinguish themselves from the common mass of general female taste to proclaim their elite status. When men ran everything they never had to worry about losing caste so were free to praise Edna Ferber et al.
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